The American Telemarketing Association, Inc. ("ATA") appreciates this
opportunity to comment on the Federal Trade Commission's ("Commission")
proposed telemarketing sales rule, 60 Fed. Reg. 8313, February 14, 1995
(the "Proposed Rule"), which is designed to implement the Telemarketing
and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101 (the
"Act"). The ATA is a professional, not-for-profit trade association
representing the telemarketing industry. Founded in 1983, the ATA has
grown to nearly 1400 members, including 500 corporations, in the United
States and nine foreign countries. Our membership includes business
executives who manage telephone-assisted marketing, own or operate
telemarketing service agencies, consult to the telemarketing industry and
supply related products such as computer systems and monitoring
equipment.

The ATA is anxious to eliminate telephone swindlers as they undermine the
credibility of legitimate telemarketers and harm the businesses that they
promote. We are dedicated to providing leadership and education in the
professional and ethical use of the telephone to increase marketing,
sales and service effectiveness and to enhance customer satisfaction and
improve decision-making. To help accomplish our mission, the ATA
regularly updates and distributes publications including consumer
guidelines designed to educate consumers on how to deal with unscrupulous
telemarketers and how to handle product dissatisfaction. In addition, we
publish a code of ethics and numerous position statements in areas
including call monitoring and 900 number telephone service.

Telemarketing is an estimated $250 billion industry employing
approximately 4.6 million people in the United States alone. Spending on
telemarketing exceeds $60 billion annually, with millions more dedicated
to support industries like computer hardware and software. A wide
variety of industries make use of telemarketing including the automotive,
catalog, communications, entertainment, financial, manufacturing, retail,
and travel industries.

I. Overview

While the ATA fully supported the Act's passage, we object to the
Proposed Rule as it reaches beyond the Act's plain language and
legislative intent in that it generally regulates all telemarketing,
rather than giving consumers necessary protection against deceptive and
abusive practices, and thus imposes undue burdens on legitimate business
enterprises. Because the Act gives consumers and state attorneys general
enforcement power, the Commission could better implement the Act by
creating the simple prohibitions discussed below which reference existing
statutes and regulations in this area. This would bring a substantial
body of existing authority to the aid of consumers in asserting claims
against fraudulent telemarketers. Moreover, it would allow legitimate
businesses to continue to abide by existing policies instead of having to
cope with unduly burdensome, and often inconsistent regulations.

The Proposed Rule needs to be changed to conform with the Act's authority
and legislative intent. As the Commission recognizes in the
Supplementary Information section, at 60 Fed. Reg. 8314, the Act
explicitly states that its purpose and intent is to "offer consumers
necessary protection from telemarketing deception and abuse." (emphasis
added) (15 U.S.C. 6102). By using the term "necessary protection,"
Congress required that the Telemarketing Act and implementing Rule must
not bar or regulate activities that would burden legitimate businesses
without protecting consumers. In addition, the term implies that the
implementing rules go beyond their charter when they stray into the area
of unnecessary interference with consumer decision-making. Congress
recognized in the crafting of the Act that the sale of goods and services
over the telephone, commonly called telemarketing, has been a cost
effective way for many legitimate businesses to reach potential
customers. (H.R. Rep. 103-20; see also S. Report 103-80 "Legitimate
purchases are made by telephone in increasing numbers.") In addition, it
was found that "the most frequent pattern of telemarketing fraud was
"fly-by-night" operators "whose contact with the consumer is limited to
the telephone and whose mobility and anonymity precludes the consumer
from any recourse if goods are deficient or undelivered." (S. Report
103-80). In short, as stated by the House, "Regulating legitimate
mutually-beneficial activities is not the purpose of this legislation."
(H.R. Rep. 103-20) Therefore, the Proposed Rule needs to be substantially
changed so that it provides necessary protection to consumers and does
not regulate or impede legitimate telemarketing activities.

We understand that the Act's power to protect consumers from deception
and abuse lies in the newly granted enforcement power. Under the Act,
states attorneys general are given the authority to bring actions in
Federal court on behalf of residents to enjoin a pattern or practice of
telemarketing which violates the rule promulgated by the Commission and
to obtain damages, restitution, or other compensation. In addition,
private persons are also granted the authority to bring actions in
Federal court which meet an amount in controversy threshold. This
Congressionally mandated expansion of enforcement power is designed to
address two enforcement problems existing at the time of the Act's
passage. First, the Commission lacked the resources to pursue an
increasing number of fraudulent telemarketers, and second, fraudulent
telemarketers tended to operate "fly-by-night" schemes, moving quickly
from jurisdiction to jurisdiction, making it difficult for a state
attorney general to use state law and state enforcement to locate and
charge such swindlers. Now that the Act addresses these problems, the
ATA believes the Commission may accomplish the Act's mission by making
the following changes:

- The definitions section should be corrected so that it remains
within the scope of the Act.

- The deceptive telemarketing acts or practices section should be
entirely replaced by a general prohibition on "misrepresentation of
material facts" without enumeration.

- The abusive telemarketing acts or practices section should be
eliminated and replaced with a simple prohibition on abusive
telemarketing acts or practices.

- The arbitrary restrictions regulating the frequency of contact that
a seller may have with a consumer who has not made a "do not call"
request should be removed.

In light of the substantial changes needed in the Proposed Rule, and
welcomed by the Supplemental Information section, the Commission should
issue a second Proposed Rule, and if necessary, seek an extension from
Congress in order to allow all interested parties to have an opportunity
to work with the Commission on further iterations of the Proposed Rule.

II. Comments

A. Definitions (310.2)

The definitions section should be corrected so that it remains within
the scope of the Act. The Commission is not authorized by Congress to
regulate activities and parties not subject to the Act's jurisdiction.
In addition, by expanding the coverage, the Commission does not increase
the necessary protection to consumers, but instead merely burdens
legitimate businesses who were not aware that they could be covered by
the Act.

The definition of "telemarketing" must be returned to the Act's
definition. The Act defines "telemarketing" as:

[A] plan, program, or campaign which is conducted to induce purchases of
goods or services by use of one or more telephones and which involves
more than one interstate telephone call.

15 U.S.C. 6106(1)(4).

The Proposed Rule expands the definition of "telemarketing" by changing
the induce purchasing language to inducing "payment." The change expands
the Proposed Rule to cover collection alone, which was not authorized by
the Act. In addition, the Proposed Rule expands the term telemarketing,
by qualifying either the whole concept or the term "telephones" to
include "the use of facsimile machine, computer modem or an other
telephonic medium."

In light of this expansion, it is not clear whether it is the term
"telemarketing" or the term "telephone solicitation" which is meant to
include new technologies. These changes expand and do not merely
"clarify" as the Supplementary Information Section would suggest. This
definition goes beyond the scope of the Act and is inconsistent with
industry usage of the term. Telemarketing is not a computer
communicating with another computer. Telemarketing is one person talking
to another. Furthermore, it goes beyond the Act when it adds the new
technologies: (1) there is no evidence to suggest that these media were
or could be used in the fraudulent transactions which led to the Act's
enactment, (2) these media were not covered by the Act and (3) consumers
receive, review and have control of information in new technologies very
differently from the way they respond to telephone solicitations.

For example, soliciting a consumer by telephone after 9 p.m. local time
at the consumer's home would be in violation of the Telephone Consumer
Protection Act ("TCPA") as well as the Proposed Rule. However, sending
an email to a consumer at any hour should not be prohibited by the
Proposed Rule. An email can be opened and read at the consumer's
convenience, at an hour of the consumer's choosing. Furthermore,
disclosures provided by telephone, such as the name of the caller (which
is objectionable for reasons described below), become meaningless with an
electronic transmission to a large audience.

In addition, while the Act appears to focus only on the activities of
"telemarketers" when they are actually "telemarketing", i.e., actually
soliciting consumers by a person-to-person telephone conversation to
purchase goods or services, the Proposed Rule goes beyond the Act. It
creates two different types of players, "telemarketers" and "sellers,"
which may cover the same business recognized in the Proposed Rule.

Furthermore, many sections of the Proposed Rule could be read to actually
regulate "telemarketers" or "sellers" even when they are not engaged in
phone sales. It becomes very apparent that this expansion goes beyond
the Act where "telemarketers" and "sellers" are forbidden from offering
or selling goods or services to a person who has any outstanding order
with the same seller. What this could mean is that virtually any
business would be unable to sell to a consumer anything if that consumer
had already, whether in face-to-face visit, by phone, or by mail paid for
any order which was not yet complete.

In order to give meaningful participation to the parties who were not on
notice, based upon the Act, that they might be covered by the Proposed
Rule, it is critical that the Commission seek an extension from Congress.

B. Deceptive Telemarketing Acts or Practices (310.3)

Section 310.3 of the Proposed Rule sets forth certain conduct which would
be considered a deceptive telemarketing act or practice. The entire
section should be replaced by a general prohibition on "misrepresentation
of material facts" without enumeration. The proposed approach is a
"front-end" regulation of legitimate businesses which will not deter
swindlers or help to protect consumers, but imposes unnecessary burdens.
Although the ATA advocates a complete replacement of the entire section,
there are specific problems which would need to be corrected, in the
event the general prohibition is not adopted.

Failure to disclose material conditions Section 310.3(a)(1) would make
it a deceptive act or practice to fail to disclose material terms and
conditions before payment is requested including: the total costs, terms
and material restrictions, limitations or conditions of receiving goods
or services; the quantity of goods and services; and the material terms
and conditions of seller's refund, cancellation, exchange, or repurchase
policies.

It would be inconvenient and burdensome to consumers to impose a number
of detailed (and possibly irrelevant) disclosures upon a consumer who
either has no interest in making a purchase at that time or who wants to
consider a wide variety of purchasing options before committing. Even a
consumer interested in making a purchase would be annoyed by a lengthy
recitation of required disclosures. In fact, the disclosures may be more
confusing coming in full form as opposed to being prompted by the natural
question-answer format that occurs on a telephone conversation.

Moreover, the rote disclosure requirement would not deter telephone
swindlers from defrauding consumers. The content of the disclosures
should be limited to material terms of the goods or services for which
the consumer is authorizing payment. Given the burden of the timing and
scope of the disclosures, and the absence of a deterrent effect on
deception, the following change should be made: Any required disclosures
may be made before payment is authorized by the consumer rather than
before payment is requested by the seller. As a result, such disclosures
may be made before or after the telephone call, by phone or a different
medium, so long as payment is not authorized before the disclosures are
made.

Misrepresentations Covering All Telemarketing Transactions

Section 310.3(a)(2) sets forth 24 examples of what would constitute a
misrepresentation of material facts and thus a deceptive act or practice.
This entire section is unnecessary to protect consumers.
Misrepresentations of material fact are already prohibited, and a
substantial body of authority regarding what constitutes
misrepresentations already exists under Section 5 of the Federal Trade
Commission Act ("FTC Act"). The effect of listing the actionable
categories creates confusion and could discourage legitimate businesses
from disclosing any non-required information. Instead of enumerating
misrepresentations, the Proposed Rule should instead simply bar
intentional "misrepresentation of material facts" and rely upon existing
authority under the FTC Act for what constitutes a misrepresentation.

While a blanket replacement of the entire section is appropriate, there
are specific problems which would need to be corrected, should the
Commission reject the blanket replacement.

Obtaining or Submitting for Payment

Section 310.3(a)(4) would make it a deceptive telemarketing act or
practice to obtain or submit for payment from a person's checking,
savings, share, or similar account, a check, draft, or other form of
negotiable paper without that person's express written authorization.
This provision is inconsistent with the Electronic Fund Transfers,
Regulation E, 12 C.F.R. Part 205, ("Reg. E"), which permits oral
authorization of such transactions. At a minimum, the Proposed Rule
should permit the obtaining or submitting for payment from a person's
checking, savings, share, or similar account, of a check, draft, or other
form of negotiable paper where the person's express authorization is
given.

Assisting and Facilitating Deceptive Telemarketing Acts or Practices

Section 310.3(b) would make it a deceptive telemarketing act or practice
to provide "substantial assistance or support" to a telemarketer or
seller when that person knows or should know the seller or telemarketer
is violating the Proposed Rule. What would constitute "substantial
assistance or support" is unclear.

Moreover, this provision covers the legitimate business that service
bureaus engaged in. While legitimate telemarketers do their best to
ensure that parties with whom they enter a business arrangement are
legitimate, it would be unduly burdensome to look into and monitor every
aspect of the other party's business every time the party calls on its
behalf. In addition, it would be unfair to hold a telemarketer
responsible for the remote actions of a third-party. The Proposed Rule
should be modified to (1) clarify the meaning of "substantial assistance
or support," (2) only apply where the seller or telemarketer acts
"knowingly," and (3) only apply where the seller or telemarketer is
directly involved in the wrongdoing.

C. Abusive Telemarketing Acts or Practices (310.4)

Section 310.4 of the Proposed Rule provides a list of abusive
telemarketing practices. This entire section goes beyond the Act's
authority and is unnecessary to protect consumers. The Act only
instructs the Commission to create rules to protect consumers from
abusive practices by creating regulations including:

(A) a requirement that telemarketers may not undertake a pattern of
coercive or abusive calls;

(B) a restriction on the time of day unsolicited calls can be made; and

(C) a requirement that any person engaged in telemarketing for the sale
of goods or services shall promptly and clearly make disclosures of
certain material conditions.

Given the grant of enforcement powers to state attorneys general and
consumers, Congress's instruction to the Commission can be satisfied by a
simple prohibition on abusive telemarketing acts or practices with
reference to existing regulations in the area.

Credit Services

Section 310.4(a)(3) would make it an abusive telemarketing act or
practice for a seller or telemarketer to request or receive payment for
services represented to improve a person's credit history, credit record,
or credit rating until the term of the contract or time frame has expired
and promised results have been achieved and documented. Section
310.4(a)(5) would make it an abusive telemarketing act or practice for a
seller or telemarketer to request or receive payment before obtaining or
arranging a loan or credit service when representing high likelihood of
success. These provisions need to be clarified so that they do not
prohibit credit monitoring services from assisting consumers to gain
access to their credit histories and providing guidance in how to
interpret the credit histories and correct errors.

Recovery room services

Section 310.4(a)(4) would make it an abusive telemarketing act or
practice for a seller or telemarketer to request or receive payment
before three days after money or other item of value is delivered. This
prohibition exempts licensed lawyers and investigators under written
agreement. The ATA is sympathetic with the purposes of this section to
target the unlawful activity wherein fraudulent telemarketers make false
promises to return to consumers money lost due to a fraudulent scheme.
However, we are concerned that, as it is written, it would cover
legitimate rebate programs provided by businesses or services provided by
a licensed attorney. This provision should be amended to clarify that it
does not apply to legitimate "rebate" services or to the services of a
licensed attorney.

Reloading

Section 310.4(a)(7) would make it an abusive telemarketing act or
practice for a seller or telemarketer to offer or sell goods or services
through a telephone solicitation to a person who has previously paid the
same seller for goods or services, until all terms and conditions of the
initial transaction have been fulfilled, including the distribution of
all prizes and premiums. This could actually hurt consumers as it would
preclude a seller from calling existing customers to renew
subscriptions, warranties, and service contracts prior to expiration,
thus allowing the services to lapse. It would burden diversified sellers
who might be treated as the "same seller" when consumers order from one
division in person, by phone, by mail, by computer, while it offered a
service from another division of the same company.

This could lead to absurd results. One example is that publishers or
affiliated service bureaus contact consumers with magazine subscriptions
prior to the expiration of their subscriptions to arrange for a renewal.
The Proposed Rule would prevent such notifications. Given that
approximately 30- 45 percent of magazine sales are renewal sales or sales
of additional magazines from the same publisher, the Proposed Rule would
tremendously interfere with legitimate businesses and prevent consumers
from getting full service.

Furthermore, for a service bureau which may be one of many bureaus
working for a given seller, it would be unduly burdensome to cross-
reference whether a consumer had previously entered a business
arrangement with that seller, as that underlying business relationship
could have been face-to-face, through another bureau, initiated by the
consumer, contacted by mail or any other form. The entire section should
be removed.

Pattern of Calls

Section 310.4(b)(1)(i) would make it an abusive telemarketing act or
practice for a telemaketer to engage in, or for a seller to cause a
telemarketer to engage in conduct including calling a person's residence
to offer or sell, on behalf of the same seller, same or similar goods or
services more than once within any three-month period, without prior
consent (except attempted or verification calls). This goes beyond the
Act, which gives the Commission the authority to prevent: "a pattern of
unsolicited calls which the reasonable consumer would consider coercive
or abusive of such consumer's privacy." The TCPA Rule already gives
consumers the ability and choice to avoid receiving repeat telephone
solicitation calls at home.

Practically, the restriction is unreasonable. In addition, because the
Proposed Rule would restrict calls to the same "residence," it would
mean, for example, that once a seller contacted one resident member who
happened to be home at the time of the call, that seller would be blocked
from communicating with any other person at that residence within the
time-frame. This provision should be eliminated as it goes beyond the
Act's mission to provide consumers with necessary protection against
telemarketing deception and abuse and is wholly arbitrary.

Do Not Call

Section 310.4(b)(1)(ii) should explicitly reference the TCPA Rule so that
there is no confusion regarding redundant, overlapping or inconsistent
requirements.

Calling Time Restrictions

Section 310.4(c) is not necessary and should be replaced with a reference
to the TCPA Rule.

Failure to Make Required Oral Disclosures

Section 310.4(d)(1)(i) would make it an abusive telemarketing act or
practice for a telemarketer to fail to make a number of oral disclosures.
Included is the requirement that all telephone solicitations shall begin
by disclosing the caller's true first and last name, the seller's name,
and that the purpose of the call is to sell goods or services. This
provision goes beyond the Act's authority. The Act requires that any
person engaged in telemarketing for the sale of goods or services
"promptly and clearly disclose" the purpose of the call and the nature of
the goods and services. The Proposed Rule should be changed so that any
required oral disclosures are made promptly and clearly. Given concerns
regarding privacy and discrimination, the Proposed Rule should permit
telephone service representatives to use "desk" names, provided that
the seller or telemarketer is able to accurately keep track of the true
identities of the telephone service representatives making a particular
call.

Verification of a Sale

Section 310.4(d)(2) would make it an abusive telemarketing act or
practice for a telemarketer to fail to repeat the required oral
disclosures during verification of a telemarketing sale. This provision
is unnecessary and unduly burdensome to telemarketers. It would cause
the caller to waste time, money and would annoy consumers and also give a
mechanical feel to the transaction. The provision should be changed to
require that only the fact of the sale be verified, assuming that the
material terms have already been disclosed.

Prize Promotions

Section 310.4(d)(3) would require "any telemarketing" which includes a
prize promotion to disclose, in addition to all other disclosures, that
no purchase is necessary to win, the verifiable retail sales price of
each prize or the statement that such price is less than $20. This
provision should be clarified so that it applies only to outbound calls
by telephone, and no other media, and to provide that if the odds are not
ascertainable the statement "odds depend upon the number of entries
received" would be acceptable. The provision should also be revised to
provide that where a retail sales price is not available, it need not be
supplied.

Premiums

Section 310.4(d)(4) require that "any telemarketing" which includes an
offer of a premium must disclose, in addition to the disclosures under
the rest of the section, the verifiable retail sales price of such
premium or comparable item or a statement that the retail sales price of
the premium is less than $20.00. This provision should be clarified so
that it only applies to outbound calls by telephone, and no other media,
and to provide that where a retail sales price is not available, it need
not be supplied, or an estimated value may be given.

D. Recordkeeping Requirements (310.5)

Section 310.5 would impose burdensome recordkeeping requirements upon
both sellers and telemarketers. In particular, the requirement that
records be kept for two years is extremely burdensome. In addition, the
Proposed Rule should be clarified so that records regarding former
employees need only account for the employees as of the time they left
the seller's or telemarketer's employ. Given that this entire section
should be restructured, it is essential that more time be given to work
with the Commission in crafting a recordkeeping requirement which would
be less burdensome to sellers and telemarketers, and which would take
into account the varying standards for the diverse industries which would
fall within this Proposed Rule.

III. Conclusion

The ATA respectfully submits that the Proposed Rule goes beyond the Act's
authority, is inconsistent with the Act's purposes and would threaten
legitimate businesses. We strongly recommend that the Commission seek an
extension from Congress in order to give interested parties the
opportunity to help the Commission in creating a new proposed rule which
would give consumers the necessary protection needed from telemarketing
fraud and abuse.

The ATA appreciates this opportunity to comment on the Proposed Rule,
and, looks forward to testifying and participating in the Public
Workshop.

Sincerely,
Stephen Sion President

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